Motion to Appoint in NATHAN PETER RUNYON VS. PAYWARD, INC., A CALIFORNIA CORPORATION ET AL| Trellis.Law

On November 26, 2019 a Motion,Ex Parte was filed involving a dispute between Runyon, Nathan Peter, and Does 1-50, Inclusive, Ng, Kaiser, Payward, Inc., A California Corporation, for civil in the District Court of San Francisco County.

Preview
1 Claire E. Cochran (SBN 222529)
Natalie A. Xifo (SBN 280930) ELECTRONICALLY
2
LAW OFFICES OF CLAIRE COCHRAN, P.C.
100 Pine Street, Suite 1250
FILED
3 Superior Court of California,
San Francisco, CA 94111 County of San Francisco

4 Telephone: (415) 580-6019 03/12/2021
Facsimile: (415) 745-3301 Clerk of the Court
BY: EDNALEEN ALEGRE
5 Deputy Clerk

6 Attorneys for Plaintiff
NATHAN PETER RUNYON
7

8 SUPERIOR COURT OF THE STATE OF CALIFORNIA

9 FOR THE COUNTY OF SAN FRANCISCO

10 [UNLIMITED JURISDICTION]

11 Case No. CGC-19-581099
NATHAN PETER RUNYON
12 EX PARTE APPLICATION FOR ORDER
Plaintiff, SHORTENING TIME FOR PLAINTIFF
13 NATHAN PETER RUNYON’S NOTICE
v. OF MOTION TO APPOINT A SPECIAL
14 MASTER

15 PAYWARD, INC., a California Corporation [Filed Concurrently with Memorandum of
Points and Authorities; Declaration of Claire
d/b/a KRAKEN; and KAISER NG an individual E. Cochran, Esq. and Proposed Order]
16
and DOES 1-50, inclusive
17 Ex Parte Hearing Date: March 15, 2021
Time: 11:00 a.m.
Defendants. Dept.: 302
18

19 Date Action Filed: November 26, 2019
Trial Date: July 12, 2021
20

23 ///
24 ///
25 ///
26 ///
27 ///
28
Page | 1
EX PARTE APPLICATION FOR ORDER SHORTENING TIME FOR PLAINTIFF’S NOTICE OF
MOTION TO APPOINT A SPECIAL MASTER
1 TO DEFENDANTS AND THEIR ATTORNEYS OF RECORD:

2 NOTICE IS HEREBY GIVEN THAT on March 15, 2020, at 11:00 a.m. or as soon as thereafter

3 as the matter may heard in Department 302 of the San Francisco Superior Court located at 400

4 McAllister Street, San Francisco, CA, Plaintiff NATHAN PETER RUNYON (“Plaintiff”) and

5 through his attorneys of record, will and hereby does move for an Order Shortening Time on

6 Plaintiff’s Notice of Motion to Appoint a Special Master.

7 Plaintiff’s Notice of Motion to Appoint a Special Master is based upon this Notice, the

8 accompanying Memorandum of Points and Authorities, the Declaration of Claire Cochran, Esq.
9 and exhibit thereto served and filed herewith.
10 Notice of this Application was given in compliance with Rule 3.1203 of the California
11 Rules of Court.
12

13 Dated: March 12, 2021 LAW OFFICES OF CLAIRE COCHRAN PC
14

15 ____________________________
CLAIRE E. COCHRAN
16
Attorneys for Plaintiff,
17 NATHAN PETER RUNYON

28
Page | 2
EX PARTE APPLICATION FOR ORDER SHORTENING TIME FOR PLAINTIFF’S NOTICE OF
MOTION TO APPOINT A SPECIAL MASTER
1 MEMORANDUM OF POINTS AND AUTHORITIES

3 I. STATEMENT OF FACTS

4 This matter was filed on November 26, 2019. Plaintiff filed a First Amended Complaint

5 (“FAC”) on January 6, 2020. Plaintiff alleges that his former employer, Defendants Payward and

6 Kaiser Ng, discriminated against him based on his disability, and that Defendants retaliated

7 against him for raising concerns about their misconduct in altering employees’ equity vesting

8 schedules.

9 The Defendants filed a Notice of Demurrer and Motion to Strike Plaintiff’s FAC

10 (“Defendants’ Motions”). The hearing on Defendants’ Motions was held on March 11, 2020. The

11 Court overruled Defendants’ request to demurrer Plaintiff’s FEHA causes of action, fifth, eighth,

12 ninth and tenth causes of action. The Court denied Defendant’s Motion to Strike Irrelevant, False
or Improper Matters in Plaintiff’s FAC in its entirety.
13
This request is being made in order to allow for the orderly and well-considered
14
resolution of a pressing discovery issue. Plaintiff’s counsel has in their possession electronically-
15
stored documents that Plaintiff provided on a USB flash drive, which substantiate that
16
Defendants altered employees’ equity vesting schedule without consent of the Payward’s Board
17
of Directors. The documents that Plaintiff obtained were prior to Payward terminating him. The
18
information is contained on two USB flash drives that Plaintiff created while he was employed
19
by Payward.
20
Counsel for Defendant, Christopher LaVigne, recently advised Plaintiff’s counsel that
21
Payward, dba Kraken, will be pursuing Plaintiff’s communications protected by the work-
22
product doctrine and attorney-client privilege under the crime fraud exception to the attorney-
23
client privilege, and any related case, as they relate to documents provided by Plaintiff. In light
24
of this assertion, and to make sure Plaintiff’s counsel is compliant with ESI collection and
25
management, Plaintiff’s counsel explained to Defendants’ counsel that the document production
26 must be conducted by an expert via a forensic analysis and any related data and documents were
27 to be produced by the expert to both sides. Plaintiff’s counsel proposed the parties stipulate to a
28
Page | 1
EX PARTE APPLICATION FOR ORDER SHORTENING TIME FOR PLAINTIFF’S MPA ISO OF
PLAINTIFF’S NOTICE OF MOTION TO APPOINT A SPECIAL MASTER
1 joint expert to expedite the process. Defendants’ counsel declined the offer and instead ignored

2 the protocol and demanded the production of the USB flash drives.

3 In order to have the forensic analysis conducted, Plaintiff’s counsel needs to have an

4 expert to create an image of the USB flash drives that Plaintiff created and no expert would do so

5 absent an Order from this Honorable Court or a stipulation from both parties that the confidential

6 data can be examined. This forensic road map is an essential first step before Plaintiff’s counsel

7 can produce the USB flash drives for inspection (and confidential production) to counsel for
Defendants. Plaintiff’s counsel was advised of this requirement just 24 hours prior to inquiring
8
of Defendants’ counsel whether they would stipulate to the appointment of a Special Master and
9
to continue the existing trial date. The need to continue the trial date is due to the upcoming
10
deadline for Defendants’ Motion for Summary Judgment which must be filed no later than
11
March 23, 2021. As such, these documents and the USB flash drives must be analyzed, reviewed
12
and produced as soon as possible. As it is unlikely that an expert can do this work within the next
13
two weeks, Plaintiff filed an ex parte application and notice of motion to continue the trial.
14
Plaintiff expects that the same forensic analysis designated will be applied to sources or
15
confidential documents produced by Defendants in this case, especially when a confidential
16
document has been or will be produced that conflicts with the versions on the USB flash drives.
17
A proper analysis and consideration of the documents has implications beyond this civil
18
action. Four days after they filed their Answer in this civil action, Defendants filed a civil action
19
against Mr. Runyon in the United States District Court for the Northern District of California –
20
reciting the identical arguments they cited in their Notice of Demurrer and Motion to Strike
21 Plaintiff’s FAC. After their first Complaint in that action was dismissed on Mr. Runyon’s
22 motion, Payward filed an Amended Complaint. In their Amended Complaint, Payward set out
23 three causes of action: (1) violation of the Defendant Trade Secrets Act (“DTSA”), 18 U.S.C. §§
24 1831-39, based on an allegation that Mr. Runyon retained his company-issued laptop, copied
25 documents that contained trade secrets, and disclosed or used the trade secrets contained in those
26 documents; (2) violation of the Computer Fraud and Abuse Act (“CFAA”), 18 U.S.C. § 1030,
27 based on an allegation that Mr. Runyon failed to return his laptop when he was terminated; and
28
Page | 2
EX PARTE APPLICATION FOR ORDER SHORTENING TIME FOR PLAINTIFF’S MPA ISO OF
PLAINTIFF’S NOTICE OF MOTION TO APPOINT A SPECIAL MASTER
1 (3) breach of contract, under California State law, for allegedly failing to return his laptop. Mr.

2 Runyon filed a new motion to dismiss; the Court granted the motion as to the first claim for relief

3 and denied the motion as to the other two claims for relief. Accordingly, that federal action,

4 which thus implicates the contents of the USB flash drives at issue here, remains pending.

5 In light of all of this, it is clear that the appointment of a digital forensics Special Master

6 is necessary to proper evaluate the contents of the USB flash drives at issue here. In particular, it

7 is clear that it is essential to a proper resolution of this action for a neutral third party to examine
the contents of the USB flash drives, including when this information was obtained – so that
8
Defendants do not further retaliate against Plaintiff and his attorneys with baseless lawsuits
9
alleging that Plaintiff stole their trade secrets after being terminated.
10

11 II. ARGUMENT

12 Special Masters are akin to the appointment of Discovery Referees. Special Masters like
Discovery Referees support the court with the efficient and effective management and resolution
13
of Ediscovery and ESI issues. Parties may stipulate to a Special Master or the court may appoint
14
the Special Master on its own motion pursuant to Code Civil Procedure sections 187 and 639 and
15
California Rules of Court Rule 3.920.
16
Pursuant to California Code of Civil Procedure § 187 this Court has all the means
17
necessary to carry it into effect “if the course of proceeding be not specifically pointed out by
18
this Code or statute, any suitable process or mode of proceeding may be adopted which may
19
appear most conformable to the spirit of this code.”
20
Pursuant to California Code of Civil Procedure § 639 (a)(5) when the parties do not
21
consent, as is the case here, the court may, upon the written motion of any party or on its own
22
motion, appoint a referee “When the court in any pending action determines that it is necessary
23
for the court to appoint a referee to hear and determine any and all discovery motions and
24
disputes relevant to discovery in the action and to report findings and make a recommendation
25
thereon.” CCP § 639 was amended in 1981 to provide trial courts broad discretion to employ
26 private referees without the parties’ consent to assist in resolving discovery disputes.
27

28
Page | 3
EX PARTE APPLICATION FOR ORDER SHORTENING TIME FOR PLAINTIFF’S MPA ISO OF
PLAINTIFF’S NOTICE OF MOTION TO APPOINT A SPECIAL MASTER
1 Pursuant to California Rules of Court Rule 3.920 (a) A court may order the appointment

2 of a referee. Again, a referee is similar to a special master. Pursuant to CRC 3.920 (c) discovery

3 referees are appointed under CCP § 639 (a)(5) under exceptional circumstances. Exceptional

4 circumstances exist in this case which require the immediate appointment of an expert to review

5 the contents, chain of custody and forensically image the USB flash drives and report to the

6 Court and parties its findings. No expert will touch these drives absent a Stipulation or Court

7 Order. Plaintiff cannot just retain an expert he needs a court order. Absent a court order
appointing a special master, Plaintiff will be severely prejudiced. The process, chain of custody
8
and dates in which the USB drives were created, a disclosure of the documents saved therein and
9
who they were provided to will be obstructed by Defendants if the drives are just simply returned
10
to them. An expert must be able to provide this forensic road map and chain of custody to the
11
Court, otherwise this data will never be properly analyzed. Returning the drives without a
12
forensic analysis will allow Defendants to prevent the production of the relevant documents, and
13
explanation of the chain of custody of the USB flash drive which only go to support Plaintiff’s
14
whistleblower cause of action and Plaintiff’s defense in the federal case.
15
Trial courts utilize discovery referees to reduce “the tension between contentious
16
discovery disputants; burgeoning caseloads; and the perception that time constraints require
17
directing judicial priorities elsewhere.’
18
Neither party trusts the other party in this case. If Plaintiff contends that the drives were
19
created on a certain date and never shared with another person other than Plaintiff’s lawyers,
20
Defendants will ardently disagree and continue to argue Plaintiff surreptitiously accessed his
21 work laptop after he was terminated and gathered these documents and shared them with third
22 parties. Defendants have and continue to make these arguments. The special master will be able
23 to present an unbiased truth A unbiased expert party needs to evaluate these drives and the chain
24 of custody to set a clean record that does not allow for hyperbole and further malicious
25 prosecution.
26 Special Masters are also appointed pursuant to California Rules of Court 3.750(b)(11) in
27 complex cases. This present case is analogous to a complex case because this is not just about
28
Page | 4
EX PARTE APPLICATION FOR ORDER SHORTENING TIME FOR PLAINTIFF’S MPA ISO OF
PLAINTIFF’S NOTICE OF MOTION TO APPOINT A SPECIAL MASTER
1 two USB flash drives that Payward believes should be returned or a discovery dispute wherein

2 documents need to be produced. At issue here is something much more complex and intricate--

3 Payward returned two USB flash drives to Plaintiff in a box among all of his belongings after his

4 termination. Payward has accused Plaintiff of removing documents from their computer system,

5 breaching confidentiality agreements, and costing them thousands and thousands dollars of

6 damage due to the production of two documents in discovery which came from the USB flash

7 drives Payward returned to Plaintiff in August 2019. This begs a larger question about whether
someone at Payward altered, duplicated, used or edited these USB flash drives before they were
8
returned to Plaintiff. A forensic expert can identify and clarify this matter. Furthermore, there are
9
too many questions and issues surrounding the creation of the USB flash drives, who saved
10
them, what was saved on them, when it was saved, and how it was saved. Payward has every
11
reason to bury all of these findings and prevent an expert from disclosing the truth about the
12
USB flash drives. Payward consistently alleges that the documents belong to them and must be
13
returned. It is just not that simple.
14

15 California Code of Civil Procedure § 845 states in relevant part:

16 (a) The court may appoint one or more special masters whose duties may include
the following (1) Investigating technical and legal issues, as directed by the court.
17
The special master shall compile a report of findings in accordance with Section
18 846.
Under this code section, the Special Master is appointed by the court and has the
19
authority to carry out court orders, whether agreed to by the parties ahead of time, or ordered by
20
the court after hearing testimony, arguments, or recommendations by party experts.
21
A Special Master appointed by the court has the technical expertise to understand
22
eDiscovery issues and settle disputes efficiently. Plaintiff proposes a scope of duty that would
23
allow the Special Master to conduct discovery, take evidence and argument, and review the
24
existing record in making recommended findings of fact, conclusions of law, or terms of final
25
judgment in his or her report. This scope of duty allows the Special Master to carefully examine
26
the complex legal and factual issues presented by the case. If appointed, a Special Master may
27
take evidence and recommend findings of fact and conclusions of law regarding the contents of
28
Page | 5
EX PARTE APPLICATION FOR ORDER SHORTENING TIME FOR PLAINTIFF’S MPA ISO OF
PLAINTIFF’S NOTICE OF MOTION TO APPOINT A SPECIAL MASTER
1 the USB flash drives. These duties fall squarely within the purview of California Civil Procedure

2 section 845(a)(1).

3 Plaintiff proposes that the Court appoint Tom Howe of the Howe Law Firm as Digital
4 Forensics Special Master. The firm has the expertise and qualifications to perform the task at
5 hand – a task that is essential to a proper resolution of this civil action and the action filed by
6 Defendants in the United States District Court.
7 III. CONCLUSION
8 The interests of justice are served by the immediate appointment of a Special Master to
9 assist the Court in reviewing the flash drives which contain confidential relevant information
10 which substantiate Plaintiff’s Labor Code section 1102.5 claims. Utilizing the skills of a digital
11 forensics special master will eliminate the parties fighting over whether or not Plaintiff “stole”
12 documents, whether the documents have been altered or reproduced in any format other than to
13 his attorneys. Nothing is more counter-productive than lawyers arguing technical e-discovery
14 issues when an expert in the field could illuminate a case knowledgeably. A Digital Forensics
15 Special Master, or court-appointed expert, is valuable resource. There is no valid reason to deny
16 such an appointment.
17
Dated: March 12, 2021 LAW OFFICES OF CLAIRE COCHRAN PC
18

19 ____________________________
20 CLAIRE E. COCHRAN
Attorneys for Plaintiff,
21 NATHAN PETER RUNYON

28
Page | 6
EX PARTE APPLICATION FOR ORDER SHORTENING TIME FOR PLAINTIFF’S MPA ISO OF
PLAINTIFF’S NOTICE OF MOTION TO APPOINT A SPECIAL MASTER
1
DECLARATION OF CLAIRE E. COCHRAN
2
I, CLAIRE E. COCHRAN, ESQ., declare as follows:
3
1. I am an attorney licensed to practice law in the State of California. I am the
4
Owner and Principal of the law firm Law Offices of Claire Cochran, P.C. (“LOCC”), attorneys
5
of record for Plaintiff NATHAN PETER RUNYON (“Plaintiff”) in the within civil proceeding.
6
If called upon as a witness, I could and would competently testify to the following:
7
2. This declaration is in support of Plaintiff’s Motion to Appoint a Special Master
8
in this civil action.
9
3. This matter was filed November 26, 2019. Plaintiff filed a First Amended
10
Complaint (“FAC”) on January 6, 2020. By February 2020, the Defendants filed a Notice of
11
Demurrer and Motion to Strike Plaintiff’s FAC (“Defendants’ Motions”). The hearing on
12
Defendants’ Motions was held on March 11, 2020. The Court overruled Defendants’ request to
13
demurrer Plaintiff’s FEHA causes of action, fifth, eighth, ninth and tenth causes of action. The
14
Court denied Defendant’s Motion to Strike Irrelevant, False or Improper Matters in Plaintiff’s
15
FAC in its entirety.
16
4. Plaintiff’s counsel has documents Plaintiff provided to LOCC on two USB flash
17
drives, which substantiate that Defendants altered employees’ equity vesting schedule without
18
consent of the Payward’s Board of Directors. The documents that Plaintiff obtained and saved
19
on the USB flash drives were prior to Payward terminating him. Payward returned two USB
20
flash drives to Plaintiff in a box of all of Plaintiff’s belongings after he was terminated. Who
21
created the drives, when were they created, what is on the drives, who, if anyone, modified,
22
altered documents and whether they were ever reproduced are all questions in this case that
23
must be addressed.
24
5. Counsel for Defendants, Christopher LaVigne, recently advised me that
25
Payward, dba Kraken, will be pursuing our work production and attorney-client privileged
26
communications under the crime fraud exception to the attorney-client privilege, and any related
27
case, as they relate to documents provided to us by our client. In light of this assertion, and to
28
Page | 1
DECLARATION OF CLAIRE COCHRAN, ESQ. ISO OF EX PARTE APPLICATION FOR ORDER
SHORTENING TIME FOR PLAINTIFF’S NOTICE OF MOTION TO APPOINT A SPECIAL MASTER
1 make sure we are compliant with ESI collection and management, we explained to Mr. LaVigne

2 that the document production must be conducted by an expert via a forensic analysis and any

3 related data and documents were to be produced by the expert to both sides. I proposed the

4 parties stipulate to a joint expert to expedite the process. Mr. LaVigne declined the offer and

5 instead ignored the protocol and demanded the production of the USB flash drives.

6 6. In order to have the forensic analysis conducted, we need an expert to create a

7 forensic image of the USB flash drives and review the metadata on every document that

8 Plaintiff saved along with a complete chain of custody; no expert will conduct a forensic
9 analysis absent an order from the Court or a stipulation from both parties that the confidential
10 data can be examined. This forensic road map and chain of custody is an essential first step
11 before we can produce the USB flash drives for inspection (and confidential production) to
12 counsel for Defendants. We became aware of this requirement just 24 hours prior to requesting
13 that Mr. LaVigne stipulate to the appointment of a Special Master and to continue the existing
14 trial date.
15 7. The need to continue the trial date is due to the upcoming deadline for
16 Defendants’ Motion for Summary Judgment which must be filed no later than March 23, 2021.
17 As such, these documents and the USB flash drives must be analyzed, reviewed and produced
18 as soon as possible. As it is unlikely that an expert can do this work within the next two weeks,

19 Plaintiff is simultaneously filing a motion to continue the trial.

20 8. Plaintiff expects that the same forensic analysis designated will be applied to

21 sources or confidential documents produced by Defendants in this case, especially when a

22 confidential document has been or will be produced that conflicts with the versions on our

23 client’s USB flash drives.

24 9. A proper analysis and consideration of the documents also has implications

25 beyond this civil action. Four days after they filed their Answer in this civil action, Defendants

26 filed a civil action against Mr. Runyon in the United States District Court for the Northern

27 District of California – reciting the identical arguments they cited in their Notice of Demurrer

28
Page | 2
DECLARATION OF CLAIRE COCHRAN, ESQ. ISO OF EX PARTE APPLICATION FOR ORDER
SHORTENING TIME FOR PLAINTIFF’S NOTICE OF MOTION TO APPOINT A SPECIAL MASTER
1 and Motion to Strike Plaintiff’s FAC. In their federal action, Case No. 3:20-cv-02130-MMC,

2 Defendants stated causes of action for Misappropriation of Trade Secrets, Unlawfully Accessing

3 a Protected Computer under Computer Fraud and Abuse Act and Breach of Contract. Mr.

4 Runyon filed a motion to dismiss; the District Court granted Mr. Runyon’s motion; and the

5 Defendants filed an Amended Complaint. In their Amended Complaint, Payward set out three

6 causes of action: (1) violation of the Defendant Trade Secrets Act (“DTSA”), 18 U.S.C. §§

7 1831-39, based on an allegation that Mr. Runyon retained his company-issued laptop, copied

8 documents that contained trade secrets, and disclosed or used the trade secrets contained in
9 those documents; (2) violation of the Computer Fraud and Abuse Act (“CFAA”), 18 U.S.C. §
10 1030, based on an allegation that Mr. Runyon failed to return his laptop when he was
11 terminated; and (3) breach of contract, under California State law, for allegedly failing to return
12 his laptop. A true and correct copy of Payward’s Amended Complaint filed in United States
13 District Court for the Northern District of California is attached as Exhibit “A.” Mr. Runyon
14 filed a new motion to dismiss; the Court granted the motion as to the first claim for relief and
15 denied the motion as to the other two claims for relief. A true and correct copy of the District
16 Court’s ruling on Mr. Runyon’s motion to dismiss is attached as Exhibit “B.” Accordingly, that
17 federal action, which thus implicates the contents of the thumb drives at issue here, remains
18 pending.

19 Efforts to Meet and Confer and Stipulate to the Appointment of a Joint Expert

20 10. On March 3, 2021, I sent a letter via email to Defendants’ counsel, Christopher

21 LaVigne. 1 I advised Mr. LaVigne of the facts set out above concerning our inability to produce

22 the flash drives until a forensic analysis had been conducted. I proposed to Mr. LaVigne that

23 the parties jointly retain an expert who could conduct an analysis of the USB flash drives and

24 map any related usage of the jump drives, and their confidential documents, immediately. I

25 also suggested that we offer up related experts as quickly as possible and get these examined,

26
1
This correspondence was designated as highly confidential and protected pursuant to Stipulated Protective Order,
27 as such it cannot be attached as an exhibit herein.

28
Page | 3
DECLARATION OF CLAIRE COCHRAN, ESQ. ISO OF EX PARTE APPLICATION FOR ORDER
SHORTENING TIME FOR PLAINTIFF’S NOTICE OF MOTION TO APPOINT A SPECIAL MASTER
1 mapped and provided to both parties for use in his deposition of Plaintiff and before

2 Defendants’ deadline to file a Motion for Summary Judgment.

3 11. I also explained that, whatever happens, it is essential that Plaintiff be allowed to

4 conduct this forensic review of the flash drives to defend against claims of wrongful acts,

5 levied against both Plaintiff and his Counsel and to substantiate his claims of retaliation for

6 whistleblowing pursuant to Labor Code section 1102.5. I also made clear that any forensic

7 review would be provided to Defendants.

8 12. On March 3, 2021, Mr. LaVigne sent an email to me in which he declined to
9 agree to the appointment of a Special Master and declined to agree to a brief continuance of the
10 July 12, 2021 trial date. Instead, Mr. LaVigne demanded that my firm send them the USB flash
11 drives absent any forensic evaluation of same. A true and correct copy of the email exchange is
12 attached as Exhibit “C.” As such, a motion was required to be filed to immediately address
13 this issue.
14 13. Based on the foregoing, it is respectfully requested that this appoint a Special
15 Master to review the contents of two flash drives at issue in this civil action and that are also
16 implicated in the civil action filed by Payward in the federal District Court.
17 I declare under penalty of perjury under the laws of the State of California that the
18 foregoing is true and correct.

19 Executed on March 12, 2021, at San Francisco California.

21
CLAIRE E. COCHRAN
22 Attorneys for Plaintiff,
23 NATHAN PETER RUNYON
.
24

28
Page | 4
DECLARATION OF CLAIRE COCHRAN, ESQ. ISO OF EX PARTE APPLICATION FOR ORDER
SHORTENING TIME FOR PLAINTIFF’S NOTICE OF MOTION TO APPOINT A SPECIAL MASTER
Exhibit A
Case 3:20-cv-02130-MMC Document 34 Filed 10/09/20 Page 1 of 27

Kimberly Almazan (SBN 288605)
1
kimberly.almazan@withersworldwide.com
2 Christopher N. LaVigne (NYBN 4811121)
(Admitted Pro Hac Vice)
3 christopher.lavigne@withersworldwide.com
Withers Bergman LLP
4
505 Sansome Street, 2nd Floor
5 San Francisco, California 94111
Telephone: 415.872.3200
6 Facsimile: 415.549 2480
7
Attorneys for Plaintiffs Payward, Inc., a
8 California Corporation d/b/a Kraken

9
UNITED STATES DISTRICT COURT
10
NORTHERN DISTRICT OF CALIFORNIA
11
SAN FRANCISCO/OAKLAND DIVISION
12
13
PAYWARD, INC., a California Corporation, Case No.: 20-cv-2130-MMC
14 d/b/a KRAKEN,
AMENDED COMPLAINT
15
Plaintiff, DEMAND FOR JURY TRIAL
16
v.
17
NATHAN PETER RUNYON., an individual,
18
and DOES 1 through 10, inclusive.
19
Defendant.
20
21
22
23
24
25
26
27
28
PAYWARD v. RUNYON
Case No. 20-CV-2130-MMC NY28571/0002-US-8632109/2
AMENDED COMPLAINT
Case 3:20-cv-02130-MMC Document 34 Filed 10/09/20 Page 2 of 27

1 Plaintiff Payward, Inc. d/b/a Kraken (“Payward” or “the Company”) alleges the following:
2 INTRODUCTION
3 1. Payward is a global cryptocurrency exchange that critically relies on trade secrets
4 and confidential business information to maintain the security of its operations. Because of the
5 nature of its business, Payward is subject to constant physical and electronic hacking attempts,
6 and the security of Payward’s physical business locations, employees, and business and customer
7 data is of the utmost importance to ensure Plaintiff’s successful and continuing business
8 operations.
9 2. This action seeks to hold Defendant Nathan Peter Runyon, a former employee of
10 Payward, accountable for unlawfully accessing and misappropriating Payward’s confidential
11 business information and trade secrets and for violating his confidentiality agreement with
12 Payward.
13 3. Payward employed Defendant as a financial analyst in its San Francisco, CA office
14 from March 26, 2018 until August 1, 2019. Before his employment began, Defendant signed a
15 Confidential Information and Invention Assignment Agreement on March 14, 2018 (the
16 “Confidentiality Agreement”) that bound him to protect and maintain in strict confidence the
17 information and data he became aware of, accessed, and stored through his employment with
18 Payward.
19 4. In connection with his hiring and employment by Payward, Defendant was
20 repeatedly made aware of, and bore witness to, the paramount necessity for confidentiality
21 surrounding Payward’s business. This need for confidentiality in all aspects of Payward’s
22 business includes numerous security measures ranging from, for example, protection of sensitive
23 customer electronic account information to safeguarding the confidentiality of the physical
24 locations and addresses of Payward’s offices.
25 5. In connection with Defendant’s employment, Payward issued Defendant a laptop
26 for use in his day-to-day activities and responsibilities at Payward. During the course of
27 Defendant’s employment at Payward, he accumulated a large amount of financial, business,
28 customer, technical, and economic proprietary information and data in the form of, among other
PAYWARD v. RUNYON
Case No. 20-CV-2130-MMC 1 NY28571/0002-US-8632109/2
AMENDED COMPLAINT
Case 3:20-cv-02130-MMC Document 34 Filed 10/09/20 Page 3 of 27

1 things, documents, emails, and internal Company communications, all of which Defendant stored
2 on his Company-issued laptop.
3 6. Payward terminated Defendant’s employment on August 1, 2019.
4 7. Payward was acutely aware of the sensitive, confidential, and trade-secret
5 information contained on Defendant’s laptop computer. Accordingly, immediately upon
6 Defendant’s termination from the Company, Payward instructed Defendant to return the laptop
7 to Payward. Additionally, Defendant was obligated under the Confidentiality Agreement to return
8 Company property, including the laptop, to Payward immediately upon his termination.
9 8. Despite repeated attempts by Payward to collect the laptop from Defendant, he
10 refused to return the laptop to Payward. Instead, Defendant strung Payward along with false
11 promises to return the laptop while he could continue to access the confidential and trade secret
12 information on the laptop.
13 9. On August 2, 2019, Defendant claimed he could not return the laptop to Payward
14 because he may be going on a vacation. On August 6, 2019, he stated he would keep Payward
15 updated on his return from vacation and when he could return the laptop. Payward followed up
16 with Defendant on August 14, 2019, seeking clarity on when Defendant would return the laptop.
17 Defendant sent a series of emails stating he would return the laptop on successively later dates.
18 10. Eventually, Defendant stated he would return the laptop to Payward on August 29,
19 2019. However, when that date arrived, Defendant emailed Payward and said the laptop had been
20 stolen from his vehicle. To date, the laptop has not been recovered.
21 11. Defendant continued to access the trade secrets and confidential business
22 information on his Company laptop while in unlawful possession of it.
23 12. Defendants became aware he was accessing and sharing the confidential and trade
24 secret information contained in the laptop because he produced copies of confidential Company
25 documents in connection with an employment lawsuit he brought in California Superior Court.
26 Plaintiff would only have access to these documents through his employment at Payward.
27 13. Defendant revealed additional confidential and trade secret information in
28 connection with his lawsuit against Payward, which alleges he was discriminated and retaliated
PAYWARD v. RUNYON
Case No. 20-CV-2130-MMC 2 NY28571/0002-US-8632109/2
AMENDED COMPLAINT
Case 3:20-cv-02130-MMC Document 34 Filed 10/09/20 Page 4 of 27

1 against by Payward based on his veteran status and disabilities and his reporting of certain alleged
2 stock vesting discrepancies. The confidential and trade secret information stored on and
3 accessible through Defendant’s laptop was extensive. The information and data he possessed on
4 his laptop went well beyond the information necessary to support his lawsuit against Payward.
5 Indeed, much of the information was completely unrelated to the lawsuit.
6 14. Among Defendant’s most blatant and unnecessary disclosures of confidential and
7 trade secret information was Defendant’s public exposure of the physical address of Payward’s
8 headquarters, which, up to the date of Defendant’s publicly-filed lawsuit, had not been publicly
9 disclosed, through great efforts by Payward to protect the confidentiality of that address.
10 15. Defendant has first-hand knowledge of Payward’s efforts to keep the physical
11 addresses of its offices, including its headquarters, confidential. Defendant worked at Payward’s
12 headquarters, and was subject to and aware of Payward’s requirement, for example, that all
13 employees and visitors sign non-disclosure agreements regarding the whereabouts and physical
14 address of Payward’s headquarters. Defendant knew that Payward instead made public only a
15 mailing address for its headquarters that is geographically distinct from the headquarters’ actual
16 address.
17 16. Defendant’s publication of the physical address of Payward’s headquarters
18 breached the Confidentiality Agreement and Payward’s standard confidentiality practices, which
19 are and were well known to Defendant. Defendant’s publication of Payward’s physical address,
20 known to him only through his work for Payward and specifically his work at that address, was
21 intentional and malicious.
22 17. Defendant’s misappropriation of Payward’s trade secrets and the breach of his
23 confidentiality agreement have required that Payward spend money and time mitigating the
24 immediate risk of harm and significant continued risk of future harm created by Defendant’s
25 failure to return his laptop upon his termination as required by the Confidentiality Agreement, his
26 continued access to the confidential business and customer information and trade secrets on that
27 laptop, his (at best) carelessness with the laptop that led to it purportedly being stolen by an
28
PAYWARD v. RUNYON
Case No. 20-CV-2130-MMC 3 NY28571/0002-US-8632109/2
AMENDED COMPLAINT
Case 3:20-cv-02130-MMC Document 34 Filed 10/09/20 Page 5 of 27

1 unknown third party, and his public revelation of the confidential physical address of Payward’s
2 headquarters.
3 PA R T I E S
4 18. Payward, Inc. d/b/a Kraken is a California corporation, incorporated in the State
5 of Delaware, with its principal place of business in San Francisco, California.
6 19. Defendant Nathan Peter Runyon is an individual and citizen of California who is
7 believed to reside at 456 South Van Ness Avenue, San Francisco, CA 94103.
8 JURISDICTION AND VENUE
9 20. This Court has subject matter jurisdiction because Payward has asserted claims
10 against Defendant pursuant to 28 U.S.C. § 1331 for misappropriation of trade secrets under the
11 Defend Trade Secrets Act (“DTSA”) and 10 U.S.C. § 1030 for violation of the Computer Fraud
12 and Abuse Act (“CFAA”). This Court has supplemental or pendent jurisdiction over Payward’s
13 remaining claims pursuant to 28 U.S.C. § 1367 because such claims are so related to Payward’s
14 federal DTSA claim that they form part of the same case or controversy under Article III of the
15 United States Constitution.
16 21. Venue is proper in the Northern District of California pursuant to 28 U.S.C.
17 § 1391(b)(1) because Payward and Defendant are residents of San Francisco, CA. Venue is also
18 appropriate in this district pursuant to 28 U.S.C, § 1391(b)(2) because the events that gave rise to
19 this complaint occurred in this district.
20 FA C T U A L A L L E G AT I O N S
21 A. Payward Is One of the Largest and Oldest Bitcoin Exchanges in the World
22 22. Payward formed in 2011 in the nascent market of cryptocurrency trading and
23 launched its trading platform two years later in 2013. Payward’s trading platform allows
24 customers to buy and trade Bitcoin and other cryptocurrencies online. Payward has grown to
25 become a leading platform with hundreds of employees and operations spanning the globe.
26 23. The cryptocurrency trading market is intensely competitive. Security is among the
27 leading factors that consumers consider when selecting a trading platform and a critical element
28 for business growth. Payward’s reputation for security translates to consumer confidence and
PAYWARD v. RUNYON
Case No. 20-CV-2130-MMC 4 NY28571/0002-US-8632109/2
AMENDED COMPLAINT
Case 3:20-cv-02130-MMC Document 34 Filed 10/09/20 Page 6 of 27

1 leads to greater usage. Greater usage helps improve liquidity — how easily assets can be bought
2 or sold at a stable price — by raising trade volume and active traders. Increased liquidity in turn
3 attracts more consumers.
4 24. The cryptocurrency trading industry is exceptionally prone to hacking attempts
5 and exploitation of trade secrets. The rise in popularity and value of cryptocurrencies has made
6 trading platforms a prime target for hackers. See Brian Fung, Why bitcoin exchanges keep getting
7 hacked – and how to protect yourself, The Switch, June 20, 2018 (“The price of bitcoin took a
8 tumble early Wednesday after a major South Korea-based cryptocurrency exchange, Bithumb,
9 admitted hackers made off with more than $31 million worth of virtual currency.”), available at
10 https://www.washingtonpost.com/news/the-switch/wp/2018/06/20/why-bitcoin-exchanges-
11 keep-getting-hacked-and-how-to-protect-yourself/?utm_term=.ab72f3bcf185.
12 25. Since 2011, there have been 56 documented hacks of cryptocurrency exchanges.
13 See Lauren Yates, Memorandum re Meeting With Bitwise Asset Management, Inc., NYSE Arca,
14 Inc., and Vedder Price P.C., SEC, Mar. 20, 2019, available at https://www.sec.gov/comments/sr-
15 nysearca-2019-01/srnysearca201901-5164833-183434.pdf. These hacks have cost exchanges
16 billions of dollars:
17 Swiped
Some of the biggest hacks on cryptocur1ency exchanges and platforms

18 EXCHANGE/
PLATFORM ORIGIN OATEOFHAC VALUEOF COlNl OSS.. INMIWONS
19 Colncheck Japan Jan 2018 $5'35
MLGox Japan Jan.2014 S450
20 B11Grall It ly Feb.2018 S\70
Bltflnu Hong Kong Aug. 2016 sn
21 Nic.eHash Slov nia Dec.2017 S70
DAO Germany Apr,I2016 S55
22 Colnt11II South Kore, June2018 S40
Youblt South Korea April 2017 S35

23 Parity U.IC. July2017 S32
Bithumb South Korea June 2018 S32
S24
24 Banco, llr I July 2018

ote- OAOwHO

Runyon v. Payward et al. - correspondence attached
Natalie Xifo Wed, Mar 3, 2021 at 7:58 AM
To: Christopher LaVigne , "Pallen, Kimberly"
Cc: Claire Cochran

Attached please find correspondence to today’s date regarding the above referenced matter.

2021 03 03 Correspondence to LaVigne regarding forensic roadmap.pdf
191K

https://mail.google.com/mail/u/1?ik=efdbe6b72c&view=pt&search=all&permmsgid=msg-f%3A1693226999056331316&simpl=msg-f%3A16932269990… 1/1
3/9/2021 The Law Offices of Claire Cochran Mail - Runyon v. Payward et al. - correspondence attached

Claire Cochran

Runyon v. Payward et al. - correspondence attached
Pallen, Kimberly Wed, Mar 3, 2021 at 1:49 PM
To: Natalie Xifo , "LaVigne, Christopher"
Cc: Claire Cochran , "Sanichar, Lalindra"

Claire,

This email responds to your letter dated March 3, 2021 regarding documents possessed by Mr. Runyon on two thumb drives that you apparently “intended” to produce, but did not reveal to us until today, the day before Mr. Runyon’s deposition.

As a preliminary matter, your rather bizarre email provides no legitimate grounds, and no legal authority whatsoever, for withholding admittedly responsive documents from us. This is especially true, given that Payward's document requests in this
matter were issued over a year ago. Because it is not clear from your letter, please immediately confirm that the documents on the flash drives referenced in your letter are responsive to our document requests and have not yet been produced in this
matter in any form.

Your justification for withholding these documents is that we intend to seek attorney-client privileged information under the crime-fraud exception, based on an objection we made for the record during Ms. Wong's recent deposition. The objection we
made for the record never stated we would be seeking those communications, but simply reserved our rights to. Additionally, that objection was aimed at communications regarding your potential facilitation of Mr. Runyon's sharing confidential
information with Ms. Wong, in light of the federal trade secret case pending against Mr. Runyon. Nothing in your letter indicates that this objection applies to responsive documents that Mr. Runyon possesses on thumb drives, unless those documents
contain communications between you and your clients regarding sharing of Payward's confidential information. If that is what your letter is meant to imply, then please state so clearly.

Your other justification for withholding these documents it that some law firm told you not to. That, of course, is not a legitimate grounds for withholding responsive documents. If that were the case, discovery would be a very simple process, and no
discovery would ever be exchanged. Also, we note two glaring omissions in your letter: (1) you state that a law firm told you not to produce these documents within the 24 hours, but you never state why, in the first instance, these documents are being
disclosed for the first time today; and (2) you do not explain why a forensic examination needs to occur before production of the documents. To the latter issue, both parties can perform independent forensic examinations. Such forensic evaluations can
be accomplished very quickly.

We therefore reject your proposal

Case Info

Judge

Samuel K. Feng Track Judge’s New Case

Case No.

(Subscribe to View)

Document Filed Date

March 12, 2021

Case Filing Date

November 26, 2019

County

Parties

CALDERON, ANDREW E. Attorney for the Defendant
COCHRAN, CLAIRE E. Attorney for the Plaintiff
DOES 1-50, INCLUSIVE Defendant
EMPLOYEE 5 Other
FORD, BRENDAN M. Attorney
LAVIGNE, CHRISTOPHER N. Attorney for the Defendant
NG, KAISER Defendant
PAYWARD, INC., A CALIFORNIA CORPORATION Defendant
RUNYON, NATHAN PETER Plaintiff
STEVENS, GREGORY W. Attorney for the Plaintiff
Natalie Xifo Attorneys for Plaintiffs
Kimberly Pallen Attorneys for Defendants
Claire Eberhard Attorney
Howard Strong Attorneys for Plaintiffs
Eduardo Dominguez Attorney
Aaron Minnis Attorney
Christopher Layne Attorney

For full print and download access, please subscribe at https://www.trellis.law/.

Motion,Ex Parte: NATHAN PETER RUNYON VS. PAYWARD, INC., A CALIFORNIA CORPORATION ET AL

Preview

Related Topics

Case Info

Parties